Colombian Avianca airline spends $7 billion to replace fleet by 2012

IntiLandauro

BOGOTA (MarketWatch) -- Colombia's largest airline, Avianca SA, said Thursday it will spend $7 billion to buy 90 aircraft from Airbus and Boeing CO
BA, -0.84%
to replace its whole fleet by 2012.

"Avianca will be the most modern and the most sophisticated company on the planet," said German Efromovich, the Brazilian businessman who owns Synergy Group, which controls Avianca and other airlines in Latin America.

The company will buy 57 medium-sized Airbus jets and lease three (18 A319, 32 A320, 10 A330) and purchase 10 Airbus A350-800 jets. Avianca will also buy 10 Boeing 787 jets, Avianca said in a statement.

The company also has signed an option to buy 10 additional A350-800 jets with Airbus.

The company had already announced the acquisitions in the past months.

Synergy will replace its aging 54 Fokker, McDonnel Douglas and Boeing 767 and 757-50 with the new jets in order to reduce its fuel bills. The new jets consumes between 20% and 25% less fuel than older jets and fuel represents between 35% and 40% of an airplane's operating costs, Efromovich said.

With oil prices over the $100 per barrel threshold, Efromovich said reducing consumption was an urgent demand.

He said the company will finance the acquisitions with loans from commercial banks and government development banks such as Export-Import Bank of the United States, or US Exim.

Not all the airplanes will be used by Avianca in Colombia, Efromovich said.

He said Synergy is seeking to merge Avianca with its other two airlines, Brazil's OceanAir and Ecuador's VipSA.

"We will operate all the airlines under the same brand, Avianca," he said. "We want to be Avianca for the world."

The company must still work out some regulatory problems to be able to fully merge its three airlines.

Avianca reported a net profit of $100 million in 2007, up from a little more than $60 million in the previous year, Efromovich said. He attributed the increase to the efficiency of the company and the increasing number of people flying in Colombia.

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